The EU in recent weeks have been preparing for the all-important two day summit and as described within the sterling section of this report Brexit will be a hot topic. However analysts are suggesting that the immigration policy will steal the show, as immigration is threating to tear the bloc apart at present. The EU report below goes into more detail about the potential impact of the EU summit in the short term. The table below shows the difference in Euros you could have received when selling £200,000.00 during the high and low points of the past 30 days.
|Currency Pair||% Change||Difference on £200,000|
The focus will be to lower immigration coming from the Mediterranean, by further tightening of external borders and reforming the EU’s Dublin regulation. This regulation states refugees should apply for Asylym in the country they arrive in. The problem is that other countries within Europe are not prepared to take immigrants and in recent weeks Italy went one step further and completely rejected a rescue ship carrying 630 refugees. Furthermore, Sunday evening Chancellor Angela Merkel called a last minute meeting ahead of the summit and Hungary, Poland, Czech Republic and Slovakia, which in the past have refused to accept refugees, all boycotted the meeting.
How do the immigration problems impact euro exchange rates?
The UK voted out of the EU and one of the main reasons was due to the free movement of people and immigration. For the EU to function correctly, quite simply, all countries need to follow the same rules. If countries such as Italy outright refuse to take immigrants there is argument to suggest sanctions will be placed on the country, which could lead to an Italexit. If reports after the summit suggest that the summit was unsuccessful, I expect the euro to come under pressure. However, for clients converting GBPEUR I still believe that the ongoing Brexit problems outweigh the immigration problem therefore I expect the pound could lose more value than the euro over the next few days.
Other key topics that will be discussed at the summit are taxation, the 2021-2027 budget, security, defence, the relationship between the EU-Nato and Eurozone reform.
The EU summit has the potential to have the most influence on Euro exchange rates for the remainder of the week. Nevertheless there are a few data releases to look out for. Today at 9am the ECB will release their economic bulletin which contains stats that influenced the ECB monetary policy decision making. Furthermore Eurozone inflation numbers will be released Friday morning. Now that the ECB have announced the taperiong of the QE program investors will watch this release closely as the ECB cannot afford for inflation to fall.
For more information on how future data releases could affect your currency requirement, call our trading floor on 01494 725 353 or email me here.
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